What Is Market-If-Touched (MIT)?
A market-if-touched, or MIT, order is a conditional order that becomes a market order when a security reaches a specified price. When using a buy market-if-touched order, a broker will wait until the security falls to a certain level before purchasing the asset. A sell market-if-touched order will activate when the price of a security rises to the specified level.
It's also referred to as a "board order."
Understanding Market-If-Touched (MIT) Orders
A market-if-touched order allows investors to purchase or sell a security at a desired value without actively monitoring the market. While similar to a stop order, MIT orders have an inverse buy or sell action compared to stop orders. For example, a buy MIT order looks for the price of an asset to fall while a buy stop order activates when the market value of the security increases past a specified level.
Let's take a look at an example:
Suppose that a stock is trading at $10.00 per share. According to your analysis, the stock will be undervalued at $8.00 per share. You may place a MIT order at $8.00 per share. If the price moves to $8.00 or below - the trigger price- a market buy order will be sent out and filled at the best price at the time. This means you can invest at the "undervalued" price without constantly watching the market.
Market-If-Touched Order Strategies
Market-if-touched orders are designed to take advantage of sudden or unexpected changes in prices. When combined with stop orders, this order type covers any scenario where you may wish to buy or sell shares based on a trigger price.
Short-term traders may be waiting for the price to hit a key support level before entering into a long position. In this case, they can place a MIT buy order at the support level to automatically send a market purchase order.
Long-term investors may be waiting for the price to reach a certain price where it may be "undervalued." In this case, they may place a MIT sell order at that price to automatically trigger a market buy order.
As these examples demonstrate, market-if-touched orders are often used in conjunction with various forms of fundamental and technical analysis that help set a key trigger price. Once that price is reached, the order type executes a market order, which is helpful for individuals managing many different opportunities, or those that may not be readily available to manually execute trades.